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Money Makes the World Go ’Round

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Economics & Finance

Economics & Finance

An important distinction of our department is the administration of the Sea Gull Fund. This is an equity portfolio managed entirely by undergraduate students – the only such program among the University System of Maryland Schools – and it provides practical lessons and experience about how money makes the world go ’round.

The Department of Economics and Finance offers studies in two closely related disciplines, economics and finance. Economics is the pulse of modern civilization. The study of economics prepares students to play meaningful roles in improving the human condition by contributing to a healthy economic climate. Finance is broadly defined as the art and science of making decisions involving money in a variety of contexts.

Is This for Me?: Defining the Disciplines

Economics is the pulse of modern civilization. The study of economics prepares students to play meaningful roles in improving the human condition by contributing to a healthy economic climate. Economics is a “social science.” Those two words provide a good bit of the answer to the title question. Economists are scientists. We design experiments, test hypotheses, make predictions, etc. As such, a good economist requires the same sort of skills needed by a good chemist or physicist. (We do a lot of mathematical modeling and statistical analysis.) As social scientists, economists work in the laboratory of everyday human and organizational behavior.

We study the choices people make as individual consumers, voters, taxpayers, employees, managers, borrowers, lenders, property owners –and how those choices affect all our living standards. Our work takes us everywhere. We study the differences in wage rates earned in different occupations, the connection between the profit motive and the environment, the advantages and disadvantages of foreign trade, the causes and costs of inflation and unemployment, the effect of government regulations on health care, the rate of return on education, the impact of new technology on costs and prices, global opportunities and challenges that we will face in the new century, among many other topics.

Economics majors learn to reason as economists, to evaluate facts and ideas analytically, to understand economic issues of historical and contemporary importance, and to achieve clarity of expression and independence of learning so that they are prepared for further education, responsible citizenship, and rewarding careers. Because of the intellectual versatility and analytical skills they develop and the wide range of issues they investigate, economists turn up almost anywhere, and move easily from one assignment to another. As an expert on competition, an economist might be involved in prosecution of antitrust cases, design of farm policy, negotiation of trade agreements or union contracts, decisions to deregulate cable TV or electricity distribution, etc. As an expert on forecasting, an economist might be engaged to predict interest rates, exchange rates, consumer spending, the size of the trade deficit, etc. Graduates who major in economics have gone on to careers in law, government, business, finance, foreign service, consulting, education and research.

Who employs economists?

Big business in any industry

State and federal agencies that make government policy or regulate businesses (Congress, EPA, FTC)

Research organizations (think-tanks)

The media (Business Week, Fortune)

International organizations (World Bank, IMF)

Large non-profit organizations, labor unions

With a B.A. in economics you can start out in a management training program in almost any industry or as a research assistant in a government agency. With a graduate degree in economics you can start out a lot closer to the top. In addition, economists are frequently self-employed as consultants.

Last, but not least, because of the skills developed in a good undergraduate economics program, economics majors score better on the Law School Admission Test (LSAT) than students from any other discipline.

Finance is broadly defined as the art and science of making decisions involving money in a variety of contexts. Finance is studied so that people can allocate their scarce resources over time under conditions of uncertainty. By doing so, individuals utilize the financial system (i.e., financial markets and institutions) as well as economic organizations (i.e., corporations and governments) as facilitators to satisfy the ultimate function, individual’s consumption preferences, including all the basic necessities of life.

Not only is finance exciting and challenging, it continues to evolve at a dizzying pace. The field of Finance has evolved in four interrelated areas:

Financial Management (Corporate Finance), which involves decision making about the financial management of a firm on topics such as decisions regarding plant expansions, choice of securities to use to finance future acquisitions, evaluating merger/acquisition opportunities etc. Essentially, Financial Management deals with the acquisition and use of funds to maximize the value of the firm.

Financial Markets and Institutions, which focuses on an understanding of the markets in which finance professionals and investors operate. This involves the study of the level and structure of interest rates and various types of financial instruments, different financial institutions and their regulatory environment, the structure and regulation of financial markets etc.

Investments, which involves an understanding of various investment options and asset allocation decisions, evaluation of various securities, assessment of appropriate risk-return tradeoffs, and construction and management of efficient portfolios etc.

Financial Planning, which involves evaluating financial goals and developing comprehensive financial plans for individuals in a highly complex and regulated environment. With changes in the demographic characteristics of the US population, and shifts in employment and retirement preparation trends, more and more people find themselves in a position of need to apply sophisticated financial planning techniques to their personal economic affairs, such as college savings plans, retirement plans, estate planning, insurance needs assessment etc.

With a good educational training in Finance, you can seek career opportunities, either domestically or internationally, in the following areas:

Corporate finance, typically within the treasury function of corporations, including working capital management, forecasting and planning, budgeting